– New Jersey
New Jersey’s most notorious economic development subsidy is the Business Employment Incentive Program (BEIP), which functions as the state’s deal-closing fund. BEIP costs the state more than $100 million per year. Because it is based on a diversion of state personal income taxes, the largest BEIP grants go to the biggest employers in the state. Goldman Sachs has been awarded at least four separate BEIP grants; one alone was valued at $164 million (see below). In 2005 Verizon got a $64 million BEIP grant plus more than $10 million in other subsidies.
New Jersey Policy Perspective issued a report in 2003 criticizing the state for issuing bonds to finance its ballooning BEIP obligations. That pressure has since been partially reduced by capping the total BEIP subsidy on a per-employee basis.
Another major subsidy program is New Jersey’s version of tax increment financing (TIF), the Economic Redevelopment and Growth Grant program, enacted in 2009. This program radically deregulated TIF in the state by allowing the diversion of 19 different state and local tax revenue streams to fund private development—far more than any other state. The state’s first use of the program subsidized the relocation of the Depository Trust & Clearing Corporation headquarters from Manhattan to the tune of $14.6 million. (DTCC also received a BEIP subsidy worth $74.6 million – see below). New Jersey calls the jobs “new” even though some of the DTCC employees (and those at other BEIP-subsidized companies) were likely New Jersey residents to begin with.
Beginning in 2011, the state began using the Urban Transit Hub Tax Credit and Business Retention and Relocation Assistance Grant programs to issue massive subsidies to major employers in the state. New Jersey Policy Perspective documented this trend in A Surge in Subsidies, which found that the state had issued nearly a billion dollars in subsidies under Gov. Christie.
One of the state’s biggest subsidy expenses is the Urban Enterprise Zone program, which provides various tax exemptions and abatements. Another increasingly expensive program is the Urban Transit Hub Tax Credit, which encourages investments near transit stations. In spring of 2011, Panasonic was approved for $102.4 million in credits through this program for a nine-mile move, from Secaucus to Newark.
In 2007, New Jersey Policy Perspective and its allies won two major reforms to the state’s economic development practices. The first reform required company-specific online reporting of individual subsidy deals, but the law has never been implemented. The second reform was a mandated unified development budget (which has yet to be produced). Incredibly, the state did not publish its first tax expenditure budget, which describes the cost of some tax credit programs, until 2010.
New Jersey does not produce a subsidy disclosure database, but it does report company-specific subsidy information for some programs in a series of annual reports (and the comprehensive BEIP Activity Report) on the New Jersey Economic Development Agency’s website.
At the time we did our Show Us the Subsidies report, New Jersey had online disclosure for only two of the five major programs we examined: BEIP and Business Retention and Relocation Agreement Grants. After our report was issued, online disclosure began for Economic Redevelopment Growth Grants. The state still does not provide online disclosure for the two other major programs: Urban Enterprise Zones and the Research and Development Tax Credit.
Key Subsidy Programs
|Subsidy Program||Recent Annual Cost||Online Recipient Disclosure||Recipient Disclosure Score*||Job-Creation/Job-Quality Score**||Monitoring/Enforcement Score***|
Business Employment Incentive Program (BEIP)
large cash grants to new or expanding businesses based on the value of new employees' personal income tax withholding
|$275 million (FY2014)||
Economic Redevelopment and Growth (ERG) Grant Program
controversial TIF program that allows up to 75% of 19 different state and local taxes to be used to subsidize private development
|$99.0 million (2012)||
Film Production Tax Credit
tax credit in an amount equal to 20% of qualified production expenses
|$1.1 million (FY2014)||
|0/100||not included||not included|
Grow New Jersey Assistance Program
corporate business and insurance premiums tax credits for job creation/retention
|$27.7 million (approvals made in 2012)||
|21/100||not included||not included|
Urban Enterprise Zone Program
sales and use tax exemptions, property tax abatements, and corporation business tax credits linked to hiring and capital investment for companies in designated zones
|$132.6 million (FY2013)||
* The score is derived from the Good Jobs First report Show Us the Subsidized Jobs (January 2014).
** The score is derived from the Good Jobs First report Money for Something (December 2011).
*** The score is derived from the Good Jobs First report Money-Back Guarantees for Taxpayers (January 2012).
Major Subsidy Deals
Goldman Sachs (2002)
In January 2002, only a few months after the 9/11 attack prompted many financial firms to start dispersing their operations geographically away from Lower Manhattan, Goldman Sachs announced that it would move a substantial portion of its trading and research operations across the Hudson River to Jersey City. New Jersey massively subsidized the relocation by providing a ten-year, $164 million Business Employment Incentive Program grant. The award, the largest ever in the BEIP program, was based on the assumption that 2,000 employees would make the move, though there were reports that Goldman Sachs might locate 5,000 people in Jersey City.
Later in 2002, the firm narrowed the scope of the operations that were to be relocated, and the size of the planned Jersey City complex was reduced. In 2004 Goldman completed a 42-story tower – the tallest building in the state – to house some 3,600 employees. In 2007 Goldman decided to resurrect its plan for a second tower in Jersey City and was awarded a 20-year abatement on local taxes. The Jersey City branch of the NAACP protested the deal, noting that Goldman had not live up to its previous promise to hire local residents. (Key sources)
Depository Trust and Clearing Corporation (2009)
New Jersey once again engaged in job piracy in 2009 when it offered the Depository Trust and Clearing Corporation more than $90 million in state and local subsidies to move 1,600 high-paying jobs across the Hudson River from Manhattan to Jersey City. Most of the money – $74.6 million – came through the state’s controversial Business Employment Incentive Program, which allows companies to keep up to 80 percent of the state personal income tax withheld from the paychecks of certain employees.
Despite the unusually high value of the BEIP grant, the state threw in another $14.6 million under the recently enacted and even more controversial Economic Redevelopment and Growth (ERG) grant program, which involves the diversion of up to 19 state and local tax streams. Jersey City contributed $1 million more in the form of Urban Enterprise Zone grants. The watchdog group New Jersey Policy Perspective put out a statement saying that it was “irresponsible” to have given Depository Trust the ERG grant after it had already committed to the move. (Key sources)
Wal-Mart in New Jersey
- At least 3 Wal-Mart locations have received subsidies worth about $1.7 million in New Jersey.
- At least 1 Wal-Mart location in New Jersey has challenged its property tax assessment.
- Wal-Mart was found to have more workers than any other employer in the state relying on publicly-funded health insurance. This shows how taxpayers end up subsidizing Wal-Mart’s policy of providing low wages and inadequate benefits.
For more information, see the New Jersey page of Wal-Mart Subsidy Watch.